Businesses might not maximise profits this festive

MBABANE – With people holding on to their buying power, retail and furniture shops might not maximise their profits this festive season.

Festive season is the ultimate shopping time where retail and furniture shops maximise their profits through great shopping response in the season. Also headline inflation is at its lowest since the year started, which could motivate people’s response to festive shopping.

Headline inflation has dropped from 3.3 per cent recorded in October 2020 to 3.0 per cent in November 2021.

The headline inflation is often referred to as a ‘measure of the increase in the price of goods and services over time.’ As measures of inflation rise, this reflects a reduction in the purchasing power of your money. In other words, these impact your ‘buying power’, as you’re now able to buy less with your money.

Economist Sanele Sibiya said “This doesn’t necessary mean prices have gone down, but the rate at which prices increase has gone down. In the country, not much money was pumped into the economy during COVID-19 thus our economy is not stable. People are without money and those with money are sceptical to spend because of the uncertainty caused by the unrest and pandemic.”

Hence Sibiya predicted that retail and furniture shops won’t have the usual or anticipated response this festive season as people are holding on to their money.

Best Electric Regional Control in Eswatini said that they were still not getting the anticipated response. “There is response but it’s not the usual or anticipated response for festive, but even on black Friday turn-up.”

A questionnaire was also sent to Ruchi wholesalers and PicknPay supermarket but they did not respond.

It’s worth-noting that for the headline inflation to stand at 3 per cent, it was due to the decrease in November prices.

Recent report from Central Statically Office stated, “Alcoholic beverages, tobacco and narcotics, decreased from 5.4 per cent in October 2021 to 3.2 per cent in November 2021. This fall is due to price decreases in alcohol beverages (mainly beer and wine), thus contributing to a lower index in this category.”

Also recreation and culture recorded a declined from 3.2 per cent in October 2021 to 1.2 per cent in November 2021. This is due to notable price decreases in pets and related products; and magazines, resulting to the lower index in this category.

Food and non-alcoholic it wasn’t the usual beverages which decreased from 4.5 per cent in October 2021 to 2.7 per cent in November 2021. This is due to notable low prices recorded mainly in vegetables, bread and cereals; and oils and fats, contributing to a lower index in this category.

An economist said, “But a decrease in prices when people are battling with being in debt and minimal disposable income does not encourage buying still.” CBE report stated that household indebtedness, as a percentage of credit over household income, was recorded at 89.7 per cent in 2020 from an observed 70.6 per cent in 2019.

STABILITY

The effects of previously projected medium-term risk factors (in the previous edition of the Eswatini Financial Stability Report) manifested in the year under review. Risks from the household sector remain elevated and are expected to continue mounting in the medium term. The contraction of household disposable income, upward inflationary pressures and a low incentive to save were of concern.”

The report stated that household income remained under pressure underpinned by challenging economic conditions.

Both formal and informal employment was affected by the initial effects of COVID-19 restrictions, however with the subsequent easing of restrictions, formal employment showed improvement.

However, businesses around the festive always anticipate huge response so they can maximise their profits.

But with minimal response, they are unlikely to make profit. Also worth noting too that CBE fifth report edition stated that wholesale and retail trade, transportation and storage, accommodation and food had a slight decrease in debt level from 2019 to 2020.

In 2019, 4 000 million was recorded and in 2020, 3 000 million was recorded.

This had gone back to the level which was recorded in 2018.